A fundamental concept underlying the income tax structure is the abilitytopay concept. Assessment year sec 29 it means the period of twelve months commencing from 1st april to 31st of march the next year. In order to satisfy the idea of justice in taxation, j. Tax preparation and law 2019 2020 income tax udemy. The income tax law comprises the income tax act 1961. Introduction and basic concept of income tax law times.
This concept states that the tax levied on a taxpayer should be based on the amount that the taxpayer can afford to pay. The relationship between income characterization and timing rules is an important factor in the design of the income tax rules applicable to business income. Income which do not form part of total income section 10, 11 to a section b. The concept of total income has been defined in section 245 of the income tax act. As the name suggests,salary received by employee is taxable under income from salariesexamplesuppose a person gets flat salary of rs 20000 p. Maximum amount of medical insurance premium is allowed rs. Basic concepts of income tax new recording youtube. An assesses may get income from different sources, eg. Nov 27, 2017 income tax basic concepts short notes a. Classifications are by tax status, size of adjusted gross income, marital status, type of tax computation and age. Nov 24, 2009 savvy income tax chartered accountancy, income tax for ipcc, income tax for pcc, income tax law for ca, students 15 comments taxation, on of the most interesting and tricky subjects in the syllabus of chartered accountancy is actually more about the concepts than the learning. The gap is an indication of potential cit revenue losses.
Clarification of the income concept in the sna broadly, this group of issues deals with the snas exclusion of holding gains and losses from income, in contrast with business accounting standards and economic theory. The act comprises of 298 sections along with their respective sub sections arranged in 23 chapters and 12 schedules. In order to pool knowledge and share experience in existing tax gap estimations, the tax gap. There are lots of sites, you tube videos which explain it. As per this concept, a person deductor who is liable to make payment of specified nature to any other person deductee shall deduct tax at source. In its wider sense it includes all the incomes or receipts which a. Basic concepts of income tax income tax income free 30. Taxable income tax rate or rates tax table or schedule gross tax credits and prepayments see table 25 net tax payable or refund due 4 formula for individual income tax definitions 5 income. Article 4 concept of residence in tax treaties arinjay. Therefore, her income tax exemption limit for financial year 201415 is rs. Mill and some other classical economists have suggested the principle of proportionate in taxation. Eam uy slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising.
What income is, is determined by capital, and what capital is, by income. Basic concepts of income tax i charteredguidance a. Introduction the concept of tds was introduced with an aim to collect tax from the very source of income. Income tax is a direct tax and we all try to save it to the best possible limit. Introduction and basic concepts of income tax act 1961. Taxes are the basic source of revenue for the government, which are utilized for the welfare of the people of the country through government policies, provisions and practices. Taxation, imposition of compulsory levies on individuals or entities by governments. The term income is defined in section 224 of the income tax act. Robert murray haig the concept of income economic legal. Jan 16, 20 a tax consists of the following elements. The definition of income as per the incometax act, 1961 begins with the words. Another concept money income has been used in most studies of the size distribution of income. Interest on public provident fund account is not taxable. Entity includes company, trust, partnership, foreign permanent establishments, retirement funds etc.
Heads of income and computation of total income under various heads 4. Whereas the pre tax income of the richer household was 10 times greater than that of the poorer household, its after tax income is 8. For example, while in many developing countries an income tax that relies on selfreporting cannot be administered at all, in a developed country the question is to what extent optimal tax design should reflect the reality of evasion, the necessity of enforcement, and the costs of collection. Major alternative concepts of income have evolved in the economic literature to serve different purposes. Discrepancies between the ways that net receipts and economic gains from selected economic events are included in or excluded from taxable income. In addition to replacing the ordinary corporate income tax with a cashflow tax, it also proposed to introduce border tax. Budget difference between exemptions and deductions change in income tax slab rate for companies amendment. New income tax calculation 2020 new income tax rates new income tax slabs old vs new tax slabs duration. Concept of beneficial ownership kpmg united states. Personal income taxes are an important means of raising revenue. Chapter 2 fundamental principles of taxation oecd ilibrary. The first result of this concept is that the income tax base is a net income number i. Chapter 2 income tax concepts 47 the federal income tax is based on a system of rules and regulations that determine the treatment of various items of income and expense.
A different concept disposablepersonal income is used in studies of consumer behavior. By law, businesses and individuals must file an income tax. Therefore, it is an inclusive definition and not an exhaustive one. The corporate income tax gap cit gap is the gap between corporate tax revenues as they should be collected and as they are collected.
Tax is calculated and compared with the amount paid and assessment order is issued. The second section highlights some of the more substantial changes to the internal revenue tax code, particularly those affecting individual income tax liabilities. Conversely, longrange tax planning alludes to such practices undertaken by the. A comparative study of income tax ation of working wives and mothers, 21 buff. Definitions and concepts of tax definition of tax the tax is a kind of tribute usually pecuniary obligations in favour of the tax creditor governed by public law.
It extends to the whole of india and come into force on 1 st april, 1962. Heads of income and computation of total income and tax liability 70% 3. It also lays down the powers and duties of various income tax authorities. Taxation of income from business and investment international. According to dalton, however, the term public income has two senses wide and narrow. The concept of income a resource book primarily for policy makers and academic tax, accounting and economics researchers, who require an indepth analysis of the concept of income and its development for tax purposes. The details of a tax relief are specified in the tax law, and there. As per this concept, a person deductor who is liable to make payment of specified nature to any other person deductee shall deduct tax at source and remit the same into the account of the central government. The income of the government through all sources is called public income or public revenue. Income tax chart book by ca pranav chandak videos available on youtube pca telegram. Hicks idea of encompassing expectations about the future in his income concept literally destroys its usefulness for measurement in the national accounts.
In income tax act the meaning of previous year is year in which income is earned previous year is represented by py. The definition, measurement, and evaluation of tax. The course will introduce the concept of income tax, tax law, and how it is formatted. An income tax is a tax that governments impose on financial income generated by all entities within their jurisdiction. Choose an example of a system you deal with in your everyday life, and explain part of its operation in terms of concepts.
Constitutional aspects of federal income taxation, by t. Income tax act, 1961 amended up to date the provisions of income tax extend to the whole of india and became effective from 141962 sec. Residential status and incidence of tax excluding section 9a 2. Clubbing provisions, set off and carry forward of losses, deductions 5. The topic has gained in prominence in the public domain given its impact on public finances, on the. It means the rate of income tax including surcharge on income tax, if any applicable in relation to the highest slab of income in the case of an individual, association of persons or, as the case may be, body of individuals as specified in the finance act of the relevant year. Basic concepts of income tax components of income tax laws income tax act, 1961 1st. The tax planning which is made every year to arrive at specific or limited objectives, is called shortrange tax planning. Overview of the federal tax system in 2019 congressional research service 2 income tax rates.
Should holding gains and losses be included in sna income. Download basic concept of income tax file in pdf format. This note seeks the guidance of the advisory expert group aeg on how to approach one of the most central and interpenetrating topics in the research agenda of the system of national accounts 2008 2008 sna. Meaning, tax revenue, non tax revenue with classification of public revenue.
Taxes are levied in almost every country of the world, primarily to raise revenue for government expenditures, although they serve other purposes as well. Includes both taxable and nontaxable income from whatever sources exclusions. This chapter compared the operation of the income tax system with the operation of other systems we have devised to govern our everyday lives. Change in income tax slab rate for individuals amendment. That is why in the modern tax system of the countries of the world, income has been accepted as the best test for measuring the ability to pay of a person.
Various examples of calculation of income tax learn. Logically, for a resident assessee income means total of all income of a. Under this income returned by the assessee is checked and verified. Looking for the practical application of a concept of income that improves the existing notion of taxable income. Although the tax base can be defined in a great variety of ways, corporate income tax cit generally relies on a broad tax base, formulated to encompass all. The year in which whole of this process is undertaken is called assessment year. Conceptoftax inheritance tax income tax free 30day. Income tax act contain 298 sections and xiv schedules.
Apr, 2020 income tax return itr changes in finance act. Sep 09, 2009 concepts of taxation chapter 16 economics. Apr 26, 2020 the income tax act, 1961 the income tax act, 1961 constitutes the substantive legislation containing the law of income tax. Department individual of the treasury income tax internal. Indirect tax on the other hand is a tax that causes rise in the price of goods and is ultimately borne by the customer.
Central board of direct tax cbdt working under department of revenue, ministry of finance is the administrative body of the direct tax laws. The key point to be made is that federal income taxation is based on a system. How to understand the concept of income tax returns in india. Salary is taxable under this head only if there isproper employer employee relationshipi. In the absence of a definition in the income tax law, the term business will have its ordinary meaning. Conduit companies set up as intermediaries receiving income on behalf of other persons who in fact receive the benefit of the income concerned, should also be denied tax treaty relief for not being the beneficial owner of the income concept based on the principle of substance over form. Concept of tax income tax history united states in 1861 revenue act 1861 income tax was imposed on the income of citizens for the first time by the u.
When examining personal income taxation, it is necessary to point out differences in defined terms and used data. The income tax is ultimately a tax on individuals, and income is. Tax is a compulsory contribution to state revenue, levied by the government on workers income and business profits, or added to the cost of some goods, services, and transactions. The legal force and effect of treasury interpretation, by f. Additional unpublished information from individual income tax returns is available on a reimbursable basis. The second section highlights some of the more substan tial changes to the internal revenue tax. Pdf personal income taxation in a context of a tax structure. For example, taxable income reflects the requirements of a tax system which must temper equity with administrative feasibility. Chapter 6 direct and indirect taxes a tax may be defined as a pecuniary burden laid upon individuals or property owners to support the government, a payment exacted by legislative authority. Basic concepts of income tax income tax income free. Concept of beneficial ownership under russian tax law, any income distributed by a russian company to a foreign company is subject to russian withholding tax at a rate of 15% for dividends and a 20% rate for royalties, interest, and other income unless reduced by applicable provisions of an income tax treaty. Tax gap estimations are rough indicators of revenue loss. The concept of tax gaps report on vat gap estimations.
This should be contrasted with vat, which is not an income tax for the purposes of ias 12, as the amount of vat is. The income tax act, 1961 the income tax act, 1961 constitutes the substantive legislation containing the law of income tax. Income tax is charge on total income earned by every person during the relevant previous year. The third section examines and analyzes aggregate time series data on individual income and taxes based on income tax.
112 484 266 712 1206 52 483 653 1239 894 772 814 735 646 997 708 1359 914 527 1484 302 979 110 679 1238 1191 802 1063 1391 1136 34 50 1466 465